Veoh's Legal Fight Against Universal Continues... With Mystery Funder

from the hmmm... dept

Last fall, you may recall, there was a very important -- and very well argued -- ruling against Universal Music in its attempt to sue video site Veoh. The court found that Veoh was clearly protected by the DMCA's safe harbor provisions. The ruling was important on a few different points, especially since the entertainment industry has been working overtime to try to change the definition of the DMCA's safe harbors to make them effectively meaningless. Thankfully, the court put a stop to that. However, things got complicated in February, when Veoh declared Chapter 7 bankruptcy. We wondered what would happen to the appeal that Universal Music was filing, and Eriq Gardner answered:

If Veoh declares Chapter 7, a bankruptcy judge would issue an automatic stay in the case. UMG would likely file a motion with the bankruptcy court seeking relief from the stay to perfect its appeal. The trustee would engage legal counsel and make financial arrangements to cover the costs of defending the case before the 9th Circuit.

However, that's not quite what happened. The case is moving forward (with the same lawyers for Veoh -- even though the company doesn't exist), but the company never actually filed Chapter 7 bankruptcy. Joe Mullin has the latest details, which don't clear up much. Instead of filing bankruptcy, at the last minute, it sold its assets to an Israeli company, Qlipso -- but the lawsuit liabilities were separate. So, basically it's a bit of a mystery who's funding the ongoing lawsuit:

On Thursday, Elkin confirmed to Corporate Counsel that he will represent the Veoh side on appeal, even though Veoh has ceased to exist as an operating company. Elkin said he is being paid to continue handling the case, which he says has consumed him for the past three years, but declined to comment on who is paying him. He said he and his team are "working mightily" to prepare their reply brief, which is due May 20.

Just weeks before Veoh went out of business, I'd been told that the company was about to secure new funding solely to prop it up to fight this legal battle. So it's interesting that there does appear to be funding, even if no one's saying where it's coming from. Of course, it wouldn't be too hard to come up with a pretty short list of probable funders...

That said, Mullin's piece also goes through UMG's appeals filing, and it's a doozy. It effectively says that the DMCA's safe harbors don't exist, because Universal Music finds them inconvenient. I'm not kidding:

[UMG] must incur the enormous expense of constantly monitoring Veoh's internet site to identify infringing content and request its removal in order to protect their property. And the task is not limited to monitoring Veoh alone. Rather, it is geometrically larger since thousands of comparable websites must also be monitored. The task is ultimately Sisyphean; because Veoh's site, like others' is dynamic and changes day-to-day or hour-to-hour [and] as users upload more material, the task of identifying and sending notifications requesting the removal of copyrighted works would amount to an unending version of the children's game of "Whack-A-Mole."

What Universal fails to point out is that if the process is hard for it, it's actually infinitely harder for Veoh, and that's because Veoh has no way of knowing for sure if content is infringing or not. As Mullin points out, Universal's argument is effectively the same one that Tiffany has made over and over and over again against eBay -- losing every time. It's the argument that because it's too inconvenient for rightsholders to police their rights, the courts should arbitrarily force service providers to do so -- even as they have no insight into what's really infringing and what's not. In fact, you could argue that Tiffany had a stronger case, in that there aren't safe harbors when it comes to trademark issues. Universal has a huge uphill battle here.

Whack-A-Mole

To expand further on why Universal's argument that enforcement is hard also applies to Veoh, Veoh would have to police all uploads for not only Universal's copyrights but any copyright owned by anyone anywhere in the world. This is just as big a Whack-A-Mole game for Veoh as policing all the websites is for Universal.

19. The result of this proceeding will disappoint the applicants. The evidence establishes that copyright infringement of the applicants’ films is occurring on a large scale, and I infer that such infringements are occurring worldwide. However, such fact does not necessitate or compel, and can never necessitate or compel, a finding of authorisation, merely because it is felt that ‘something must be done’ to stop the infringements. An ISP such as iiNet provides a legitimate communication facility which is neither intended nor designed to infringe copyright. It is only by means of the application of the BitTorrent system that copyright infringements are enabled, although it must be recognised that the BitTorrent system can be used for legitimate purposes as well. iiNet is not responsible if an iiNet user chooses to make use of that system to bring about copyright infringement.
20.The law recognises no positive obligation on any person to protect the copyright of another. The law only recognises a prohibition on the doing of copyright acts without the licence of the copyright owner or exclusive licensee, or the authorisation of those acts. In the circumstances outlined above and discussed in greater detail in my judgment, it is impossible to conclude that iiNet has authorised copyright infringement.